Herbalife represent, expressly or by implication, that Herbalife Distributors are likely to earn substantial income, including significant full-time or part-time income, from pursuing a retail-based business opportunity.

In reality, however, Herbalife’s program does not offer participants a viable retail-based business opportunity.

The retail sale of Herbalife product is not profitable or is so insufficiently profitable that any retail sales tend only to mitigate the costs to participate in the Herbalife business opportunity.

The overwhelming majority of Herbalife Distributors who pursue the business opportunity make little or no money, and a substantial percentage lose money.

The overwhelming majority of Herbalife Distributors who pursue the business opportunity do not make anything approaching full-time or even part-time minimum wage because the promised retail sales to customers simply are not there.

The overwhelming majority of Herbalife Distributors who pursue the business opportunity make little or no money from retail sales.

Half of Distributors whom Herbalife designate as “Sales Leaders” average less than $5 per month in net profit from retail alone, and half of these Distributors lose money.

In light of their poor financial results, many Distributors either stop
buying product or leave the organization altogether, resulting in a high turnover rate.

In 2014 nearly 60% of first-time Sales Leaders did not purchase sufficient product to requalify as Sales Leaders.

Retention for non-Sales Leaders, many of whom are pursuing the
business opportunity, is even worse.

An analysis of Defendants’ data shows that the majority of Distributors stop ordering Herbalife products within their first year, and nearly 50% of the entire Herbalife U.S. Distributor base quits in any given year.

Roughly half of all Herbalife Distributors at any given time are in their first 12 months of membership, and roughly 40% of the volume of Herbalife products
sold by Defendants each year is sold to participants in their first year.

During 2009–13, an annual average of approximately 242,000 new
Distributors signed up in the United States.

On average, 89% of those newlyrecruited Distributors, however, simply replaced U.S. Distributors who left that same year, with an annual average of approximately 216,000 Distributors leaving during this time period.

Now bear in mind, the above is the current status of Herbalife with recruitment commissions and no retail sales volume qualifiers.

As evidenced by the lack of retail sales in the previous compensation plan, Herbalife’s products as is don’t appear to be viable at a retail level.

This is going to require a massive shake up of Herbalife’s product offering, from the products themselves to how much Herbalife are charging.

To compete effectively at a retail level, it’s likely the price of Herbalife products will have to be reduced. This will correspond with an overall reduction of commissions paid to affiliates who do manage to qualify.

With the “overwhelming majority” of Herbalife affiliates currently not making part-time minimum wage, reduced commissions is going to make that achievement all the more difficult.

The metric to keep an eye on in the future is Herbalife’s revenue.

The first few reports over the coming months might misleading show growth (as with Vemma, the MLM industry might temporarily rally around Herbalife to generate artificial retail sales).

After that however, Herbalife’s overall sales revenue will be a fraction of what it was before. That’s going to be a huge hit to the company’s bottom line and seriously question the long-term viability of Herbalife going forward.

Whether that’s reflected in Herbalife’s share-price remains to be seen. Whereas I’ve completely ignored Herbalife’s share-price up to now, it might actually be worth paying attention to six months to a year from now.

Despite the reality of being forced to apply a retail orientated compensation plan to an affiliate-base that has consistently failed to generate significant retail sales for decades, Herbalife management remain upbeat about the future.

Oz, I think you’re slightly unfair. Herbalife’s management has really done a great job keeping the company afloat and routinely beating expectations under pretty tough conditions.

I don’t think they can continue anything like they have in terms of success, but I wouldn’t be surprised if they didn’t have another rabbit or two on their hat. At the least, I’ll expect four more good quarterly reports where they imply these changes are implemented.

Via operation of a pyramid scheme. That’s nothing to commend them about”.

It is clear the FTC stopped short of defining Herbalife a pyramid scheme for whatever reason and clearly could have. It is incorrect to call them as such. That matter is legally closed, Herbalife is not a pyramid scheme as legally defined.

Jesse is completely correct. Whether you like HLF’s business model or not, their executive management has done an excellent job in maintaining value in the company and continuing operations against many fronts with many powerful enemies (Ackerman, US Govt).

I agree it remains interesting to see how HLF does over the next year or so, but it is silly to be so sure of the company will “bottom-out” when it has done the exact opposite so far in face of difficult challenges.

My guess is only about 15-20% of Herbalife’s retail sales are in the US (the FTC restrictions only affect the US market).

Amway is a $10B company not because of its sales and affiliates in its home US market but because of their dominance in China. My guess is Herbalife will do more than just survive. Feel free to root against them, but I wouldn’t recommend betting any real money on that.

Did you read the complaint? They defined Herbalife as a product-based pyramid scheme about a dozen times.

This is absolutely incorrect. The US neither officially classified Herbalife as a pyramid scheme nor shut its business down, actions the US Government has no problems doing if they see fit (see Vemma).

Enemies is the correct term, at least when referring to Ackerman. If the semantics bother you, I’ll use ‘foe’ or ‘adversary’. Let me know. Feel free to suggest other less offending terms.

Amway isn’t a publicly-traded company. Herbalife use the same compensation plan globally and so they currently operate as a pyramid scheme world-wide.

If the US business tanks the company is sustaining itself only by continuing to operate as a scam globally.

If this is to be the apex of the MLM industry, we’ve got problems.

Again, your comments are absolutely incorrect. Herbalife cannot and does not use the same operating model worldwide since the US model is illegal in a number of countries (China, Western Europe, etc.).

For instance, affiliate networks are limited in China (to 6 people, I believe). MLM businesses in China cannot build a business based on recruitment. It is why Amway has opened over 300 storefronts in China and consumers have the ability to buy products for the identical price either from affiliates or from brick-and-mortar stores.

Amway did not do this by choice by some stroke of genus insight, they were forced to so in order to do business there and it now has become an important part of their worldwide business strategy. The opening of their first European storefront in Germany this year is an example.

Similar to Amway (which is the apex of the industry btw), if Herbalife is able to increase their presence in China, a big if since Amway has an almost monopoly-type dominance there, then Herbalife will do more than just survive.

The US business model will be largely unchanged, but just a smaller part of their overall business. Another way to look at HLF is that their business is a certain size in spite of their relatively small presence in Asia.

If they manage to tap into that market like they have been planning, they will be a growth story.

People in denial such as yourself are running around telling people it’s an elephant.

Again, your comments are absolutely incorrect. Herbalife cannot and does not use the same operating model worldwide since the US model is illegal in a number of countries (China, Western Europe, etc.).

For instance, affiliate networks are limited in China (to 6 people, I believe).

Aaong: This is absolutely incorrect. The US neither officially classified Herbalife as a pyramid scheme nor shut its business down, actions the US Government has no problems doing if they see fit (see Vemma)

‘technically’ speaking, you are correct. the FTC did not charge ‘pyramid scheme’ or move the court to halt herbalife. as things stand, herbalife has neither been proved to be a pyramid scheme and neither is it absolved of being a pyramid scheme.

ackman precisely said that herbalife was a pyramid scheme which would be shut down and its stock would go to zero, so technically he is 100% wrong in his allegation.

the FTC complaint is also just that, a complaint which has unproved allegations. they did not move the court to prove their allegations and neither did herbalife disprove their allegations in court. so, the complaint does not have any legal value as such.

the only important document is the permanent injunction that the FTC and herbalife have agreed to.

herbalife’s argument was that its business model was legit, and it created the impression that they would get by with a fine and some wrist slapping.

but, the wrist slapping turned out to be a punch in the head. herbalife can probably do very well in other countries, maintain its bottomline and keep it stock value up, but that was not it’s argument. herbalife was wrong that its business model was fully legit.

technically herbalife won, but morally it lost. it may be some sort of victory, but not one worth celebrating.

More importantly, once they cut out recruitment commissions and top affiliates, who have been profiting on recruitment commissions for years, abandon ship… Herbalife will lose.

That’s the long-term play the FTC have made.

Anytime an MLM company has made significant changes to a comp plan a bunch of top leaders jump ship (see Vemma). A few loyalists remain before eventually giving up when realize the gravy train has dried up.

Herbalife in the US isn’t going to be any different when these changes are implemented.

The only reason die-hards are still optimistic is because Herbalife haven’t implemented the changes yet.

Aaong: The US neither officially classified Herbalife as a pyramid scheme nor shut its business down,

Technically correct, but you’re ignoring the elephant in the room.

This case is a landmark case, just like how FTC vs. Amway (1979) defined the entire MLM industry. Officially, Amway was not classified as a pyramid scheme either… BECAUSE IT CONSENTED TO THE CHANGES… Just like Herbalife did now.

It is NO LONGER THE COMPANY IT WAS. Its business model has been OVERHAULED. Whether it is viable remains to be seen.

K. Chang: It is NO LONGER THE COMPANY IT WAS. Its business model has been OVERHAULED. Whether it is viable remains to be seen

probably in response to all the speculation about the FTC/herbalife injunction and how deep the wound is, alan hoffman, executive vice president, global corporate affairs, issued a statement yesterday:

After more than two years of working with the FTC, I think we understand the terms of the settlement agreement very well.

We would not have settled unless we had the greatest confidence in our ability to comply with the agreement and grow our business and we believe this will be proven out over time.

the terms of the settlement appear to be very tough, so i wonder how herbalife ‘understands’ these terms. cant wait to see how herbalife implements these changes!

K. Chang: This case is a landmark case, just like how FTC vs. Amway (1979) defined the entire MLM industry. Officially, Amway was not classified as a pyramid scheme either… BECAUSE IT CONSENTED TO THE CHANGES… Just like Herbalife did now.

there is a difference in the amway and herbalife cases.

amway was not found to be a pyramid by the court, and this decision created a precedent, which was legally applicable to other MLM.

herbalife has been settled via an injunction ratified by the court, it does not establish precedent which is applicable to other MLM.

‘technically’ speaking, this injunction is limited to herbalife. ‘practically’ speaking, it is a ‘message’ from the FTC to the industry but not legally binding. herbalife, being the huge mammoth it is, did not fight this injunction, and this implies that smaller MLM better not fight this ‘message’ of the FTC either.

You go away and read Sun Tzus’ “The Art of War” a few times, then, maybe you’ll realize not everything requires “caselaw” or to be “legally binding” to be effective.

At a stretch, you might even stop filling up other peoples’ blogs with nonsensical hypotheticals.

The FTC now has Vemma and now Herbalife exactly where it wanted them and did it without protracted and costly legal maneuvering or having to set “legal” precedent, also a protracted and costly process.

Both Herbalife US and Vemmas’ future is now completely within their own hands.

“IF” they are operating within guidelines as they have been claiming for years,the FTC has done them a favour by clarifying those guidelines and neither of them has anything to worry about.

You go away and read Sun Tzus’ “The Art of War” a few times, then, maybe you’ll realize not everything requires “caselaw” or to be “legally binding” to be effective.

i’ll tell you what, littleroundass.

you go back and read my comment again. i have not said that this injunction has ‘no’ effect, but it does not have the effect of caselaw or precedent.

if you do not understand the difference between the reach of caselaw and a settlement, then it is probably because you’re sitting around reading Sun Tzus’ “The Art of War” all day long. expand your reading list a bit. choose diverse topics, i say.

littleroundman: The FTC now has Vemma and now Herbalife exactly where it wanted them and did it without protracted and costly legal maneuvering or having to set “legal” precedent, also a protracted and costly process

^^ this is being penny wise, pound foolish IMO.

vemma and herbalife may have been put where there belong, and a ‘message’ may be out to the rest of the industry, but a ‘message’ does not have the weight of caselaw [btw, vemma is not resolved yet, herbalife is]

the MLM industry needs ‘legal’ clarifications on autoship [vemma] and self consumption [herbalife] which would be best served by developing caselaw, and not via settlements.

littleroundman: Both Herbalife US and Vemmas’ future is now completely within their own hands.

you don’t say!! i must thank you for filling up other peoples’ blogs with such deeply insightful wisdom.

– so who’s the girl who caught one, no wait, TWO consecutive errors in a federal court order ?[not little roundman]

– so who’s the girl who said bell would have to prove ‘purposefully directed action’ for jurisdiction over foreign defendants? [not little roundman]

– so who’s the girl who rightly said the vemma injunction is not applicable to the whole industry? [not little roundman]

– so who’s the girl who’s correctly stating that the herbalife injunction is not binding on the whole industry? [not little roundman]

– i could go on, but i’m so damn modest 🙂

and btw, if the DOJ wants to prove zeek was a ‘fraud’ they’re very welcome, at least little roundman wont be able to flit around the internet claiming zeek was a ‘ponzi'[as explained under securities]. what is unproved is an allegation and nothing else, and what is not charged is not even an allegation.

and, and, and, even in herbalife the FTC has skirted the ‘pyramid’ argument, whether it was due to negotiation or for lack of pyramid ‘ammo’ is a separate question.

so, there is some ‘truth’ in the doubts i have raised. always better to question and think, i say. no point hanging around throwing hollow punches like LRM, i say.

Again absolutely incorrect. Herbalife has a leadership position in Latin and South America, largely Brasil. It is a big part of their business and a big reason why HLF has increased product sales by almost double digits last year even in the face of the investigation.

Amway is trying to crack the HLF dominance of the Latin/South American nutrition market the same way HLF is trying to enter China and India.

13. Herbalife Nutrition Clubs were recruitment tools and not profitable

14. Herbalife affiliate attrition rates are horrendous

Nothing in the factual allegations have been changed. FTC only dropped the label “pyramid scheme”, saying that Herbalife had all the characteristics of a pyramid scheme but the case has been settled.

FTC haven’t proved it in court, and Herbalife haven’t disproved it. But Herbalife have agreed to restructure its business model and to be supervised for seven years. It also paid for damages it had caused.

Aaong:
One’s personal opinion can disagree, but legally the matter of being a pyramid scheme has been put to bed by the ruling. This is neither a semantics argument nor splitting hairs, it was central to the primary purpose of the investigation.

You added a lot of personal opinion yourself?

Why don’t you read the settlement? I haven’t read it myself, but I had a quick look at the press release from FTC a week ago.

Your idea:

Aaong:
recruitment is still an important part of the business model in the US for Amway. This will likely be the case for HLF after they modify their reward plans. Rewards will likely get shifted entirely to product sales by recruitments as opposed to signing up recruitments.

The reality:

Multi-level compensation that business opportunity participants earn will be driven by retail sales.

At least two-thirds of rewards paid by Herbalife to distributors must be based on retail sales of Herbalife products that are tracked and verified.

No more than one-third of rewards can be based on other distributors’ limited personal consumption.

You will notice a lot of changes, but they will come gradually over 10 months or more. You can compare it to Vemma’s changes, but Vemma only had to have 51% retail sale to non-affiliates. Herbalife will need to have 67% sale to non-affiliates after 10 months.

If you read the actual ruling and not someone’s blog post, you’ll know that Herbalife violated four counts of the FTC Act: Unfair Practices, Income Misrepresentations, False or Unsubstantiated Claims of Income from Retail Sales, Means and Instrumentalities (or deceptive promotional material). “14 key points”, lol.

Don’t get me wrong, the FTC ruling is serious and significant. Among other things, it found that HLF “deceived consumers”, that their “compensation structure was unfair”. The FTC asserted that their promotional marketing materials used in recruitment were essentially fraudulent.

But understand this, the FTC found them (Ozedit: to be a pyramid scheme and in violation of the law. Made up story removed)

I have no idea what you’re talking about there. I gave you a link to a behindmlm article about 14 key points. It quotes directly from the Complaint against Herbalife. I also gave you a list of those 14 key points.

Nothing has really changed in the factual allegations. FTC only dropped the label “pyramid scheme”, it didn’t change the factual allegations.

Aaong:
If you read the actual ruling and not someone’s blog post, you’ll know that Herbalife violated four counts of the FTC Act: Unfair Practices, Income Misrepresentations, False or Unsubstantiated Claims of Income from Retail Sales, Means and Instrumentalities (or deceptive promotional material). “14 key points”,

It’s a settlement, not a ruling (nothing has been proven in court). The factual allegations haven’t been disputed by Herbalife. The settlement is based on those allegations.

Herbalife didn’t “clear its name and reputation”. It didn’t dispute anything. It only avoided the label “pyramid scheme”.

I have no idea what you’re talking about there. I gave you a link to a behindmlm article about 14 key points. It quotes directly from the Complaint against Herbalife. I also gave you a list of those 14 key points.

Nothing has really changed in the factual allegations. FTC only dropped the label “pyramid scheme”, it didn’t change the factual allegations.

Omg. The 14 key points you state from behindmlm are someone’s interpretation and opinion of the FTC complaint. It was not from the FTC. The FTC will never state a company’s “attrition rates are horrendous”. That was someone’s opinion in a blog article.

Here is the FTC complaint: ftc.gov/system/files/documents/cases/160715herbalifecmpt.pdf

Pages 39-40 detail the four counts that HLF was accused to be in violation.

It’s a settlement, not a ruling (nothing has been proven in court). The factual allegations haven’t been disputed by Herbalife. The settlement is based on those allegations.

Herbalife didn’t “clear its name and reputation”. It didn’t dispute anything. It only avoided the label “pyramid scheme”.

I am seeing this same non-legal, incorrectly informed opinion elsewhere in this blog. The settlement is legally binding between the parties. It may not set legal precedent but it is an offical document with legal conclusions as if it did go to trial.

The allegations and some of the legal definitions of what HLF is and isn’t have been defined in the ruling including that HLF is not a pyramid scheme (they are defined as a MLM company in the ruling, which is legal business and not a pyramid scheme).

It is obvious that Herbalife did not clear its name and reputation to you. That is fine and your right.

However, this settlement and ruling did accomplish a number of things for Herbalife including freedom to operate and the understanding that is is a legal operation, albeit one that was in violation and with a number of practices is needs to fix.

It contains the normal “Defendants neither admit nor deny any of the allegations in the Complaint, except as specifically stated in this Order”. That’s what you normally will find in settlements.

If you want me to look at something specific then you must say so.

Aaong:
Vemma and Herbalife are two very different situations and had two different rulings. For one, the FTC classified Vemma as a pyramid scheme and forced it to shut down temporarily.

Vemma decided to dispute pyramid scheme allegations. Herbalife decided to settle without a fight, to avoid the same situation Vemma is in. But Herbalife got similar types of restrictions.

FTC classified Herbalife as a pyramid scheme too … in the Complaint. The Complaint is about the substance of the case, about all the alleged “wrong doing”. It will be seen as factual and true … as undisputed by Herbalife but neither admitted nor denied.

Aaong:
Omg. The 14 key points you state from behindmlm are someone’s interpretation and opinion of the FTC complaint. It was not from the FTC. The FTC will never state a company’s “attrition rates are horrendous”. That was someone’s opinion in a blog article.

You’re probably correct. Oz have probably added some “personal colour” in his description. I guessed that he had quoted directly from the Complaint … like he usually does.

Herbalife has a leadership position in Latin and South America, largely Brasil. It is a big part of their business and a big reason why HLF has increased product sales by almost double digits last year even in the face of the investigation.

Feel free to explain how the following, quoted directly from the FTC complaint, doesn’t describe Herbalife as a pyramid scheme:

Herbalife’s compensation program incentivizes not retail sales, but the recruiting of additional participants who will fuel the enterprise by making wholesale purchases of product.

As a consequence, the small minority of Distributors who receive substantial income through Herbalife are primarily compensated for successfully recruiting large numbers of business opportunity participants who purchase Herbalife product.

Herbalife was also fined for harm to consumers, certainly not the result of a legal business model.

If you want to live in an alternate reality, that’s fine. Do it elsewhere. You can address the above in your next comment. Anything else will be marked as spam.

Feel free to explain how the following, quoted directly from the FTC complaint, doesn’t describe Herbalife as a pyramid scheme

There are a number of details in the investigation on why the FTC did not/could not classify HLF as a pyramid scheme. One reason is actually in the quote you provided.

As you cited, HLF’s compensation program did not solely reward based on recruitment. It incentivized recruitment by providing recruitment rewards but it was not the only way distributors made money. They were also rewarded based on retail sales.

As you also quote, some of the big distributors were primarily, but not solely, rewarded based on recruitment.

Unlike companies like New Life, Vemma, etc. a HLF distributor’s income was not entirely or almost entirely provided by recruitment. It did not meet the burden or companies declared to operate an illegal enterprise (i.e., pyramid scheme).

There are a number of details in the investigation on why the FTC did not/could not classify HLF as a pyramid scheme.

By defining Herbalife over and over again as a pyramid scheme, they classified it as one. They just didn’t use the label.

HLF’s compensation program did not solely reward based on recruitment. It incentivized recruitment by providing recruitment rewards but it was not the only way distributors made money.

When recruitment is the primary source of revenue, everything else is pseudo-compliance. That’s how pyramid scheme regulation works.

They were also rewarded based on retail sales.

And the problem was, like in all pyramid schemes, there was next to no retail activity taking place. So again, outside of paying affiliates to recruit new affiliates, everything else in Herbalife’s compensation plan was pseudo-compliance.

Unlike companies like New Life, Vemma, etc. a HLF distributor’s income was not entirely or almost entirely provided by recruitment.

Yet that’s exactly what the FTC’s complaint states:

As a consequence, the small minority of Distributors who receive substantial income through Herbalife are primarily compensated for successfully recruiting large numbers of business opportunity participants who purchase Herbalife product.

You don’t need to be paying solely on recruitment to be a pyramid scheme, recruitment commissions just needs to be how the majority of your affiliates are earning the majority of their commissions (this is consistent with the Vemma action, which was 5% retail or some small percentage from memory).

Mate look, we’re here to discuss the FTC complaint. If you want to pass off the complaint and discussion around it as opinion, that’s fine – but you’re making up an alternate reality that departs from the facts as presented in the complaint.

We stick to the facts here, anything else is irrelevant.

The FTC complaint clearly states Herbalife affiliates primarily earned commissions on the recruitment of new affiliates. Thus far you’ve failed to explain how that’s not a pyramid scheme.

Instead you’re crapping on about it being “an opinion” and then pushing alternate reality discussion points that have nothing to do with the FTC’s complaint or its content.

In my opinion, with “product driven pyramid schemes” like Vemma and Herbalife, it takes a lot of consumer complaints or massive media coverage before they act.

For example, with Vemma it took complaints from the parents of the college students to get the FTC to investigate.

At the Federal Trade Commission’s request, a federal court has temporarily halted an alleged pyramid scheme, Vemma Nutrition Company, that lures college students and other young adults with the prospect of getting rich without having a traditional 9-to-5 job.

The FTC seeks to stop the operation, which earned more than $200 million annually in 2013 and 2014 and has affected consumers throughout the United States and in more than 50 other countries, from continuing as an unlawful pyramid.

“Rather than focusing on selling products, Vemma uses false promises of high income potential to convince consumers to pay money to join their organization,” said Jessica Rich, Director of the FTC’s Bureau of Consumer Protection. “We are also alleging that Vemma is an illegal pyramid scheme.

It always was because it lends itself to a focus on affiliate recruitment, which in MLM equates to a pyramid scheme.

Only now though are we seeing a regulator do something about it.

If the FTC takes on another MLM company that’s guilty of using the same model in the next 6 months, I would agree with your statement of “Only now though are we seeing a regulator do something about it.”

If not, then it’s business as usual for the other MLM companies using a similar illegal pyramid model. Well, until the consumer complaints hit the level needed for the FTC (white knight) to ride in and save the participants (voters) of the next Zeek Rewards.

Your vehemence is commendable, but you’re basically splitting hair. The stipulation, signed off by both HLF and FTC clearly stated:

2. The Complaint charges that Defendants participated in unfair and deceptive acts or practices in violation of Section 5 of the FTC Act, 15 U.S.C. § 45, by: promoting participation in a multi-level marketing program with a compensation structure that causes or is likely to cause harm to participants; making false or misleading income representations; making unsubstantiated claims regarding the retail sales income earned by participants in Defendants’ program; and providing participants in Defendants’ program with the means and instrumentalities to engage in deceptive acts and practices.

…

5. Defendants waive all rights to appeal or otherwise challenge or contest the validity of this Order.

While it is true that Section 5 of FTC act does not mention “pyramid scheme” by name, it clearly stated that FTC was going after “unfair and deceptive acts or practices”.

(law.cornell.edu/uscode/text/15/45)

So basically HLF pled “no contest” of being an unfair and deceptive business, and agreed to change the way it does business.

Whether it was operating as a pyramid scheme or some OTHER type of unfair and deceptive business prior to the changes is a moot point. It basically admitted so.

K. Chang: We’ll see if other MLM companies start following the “HLF Safeguard Rules”, and whether DSA started recommending its members to do so soon

the DSA president joseph mariano has already made a vacuous statement about the FTC/herbalife settlement:

“We are confident that today’s announcement regarding the settlement of the Federal Trade Commission (FTC) enquiry into Herbalife, a Direct Selling Association (DSA) member, will serve to answer questions and misunderstandings about the direct selling business model, which have arisen during the course of matter.

..blah..blah..

..We are proud of our decades-long commitment to self-regulation and look forward to continuing our dialogue with policy makers, the FTC, our member companies and other stakeholders to support and further strengthen policies that protect consumers, and what guidance direct sellers and other businesses might take from today’s announced settlement.”

many industry voices are smarting under what they perceive as ‘overreach’ of the FTC. i suspect the DSA is going to rally its troops and push for the HR 5230 legislation, the “Anti-Pyramid Promotional Scheme Act of 2016,” which is currently pending before the ‘House Energy and Commerce Committee’.

supporters of this bill are hoping donald trump wins the presidential election as they feel his regime will be sympathetic to the MLM industry.

To be factually accurate, the complaint (not the ruling as I earlier stated) accused Herbalife of four violations of the FTC Act. Still not 14.

Here’s the Complaint against Vemma.

Plaintiff, the Federal Trade Commission (“FTC”), for its Complaint alleges:

I. The FTC brings this action under Section 13(b) of the Federal Trade Commission Act (‘”FTC Act”), 15 U.S.C. § 53(b), to obtain temporary, preliminary, and permanent injunctive relief, rescission or reformation of contracts, restitution, the refund of monies paid, disgorgement of ill-gotten monies, the appointment of a receiver, and other equitable relief for Defendants’ acts or practices in violation of Section 5(a) of the FTC Act, 15 U.S.C. § 45(a), in connection with the advertising, marketing, promotion, and sale of opportunities to sell health and wellness drinks.

Vemma was about a shutdown, while Herbalife is about a settlement. It’s formulated slightly different, but it has the same cause of action.

Here’s Herbalife.

Plaintiff, the Federal Trade Commission (“Commission”), filed its Complaint for Permanent Injunction and Other Equitable Relief (“Complaint”) in this matter, pursuant to Section 13(b) of the Federal Trade Commission Act (“FTC Act”), 15 U.S.C. § 53(b). The Commission and Defendants stipulate to entry of a Stipulated Order for Permanent Injunction and Monetary Judgment (“Order”), lodged concurrently with this Stipulation, with the following terms and provisions:

– – – –

2. The Complaint charges that Defendants participated in unfair and deceptive acts or practices in violation of Section 5 of the FTC Act, 15 U.S.C. § 45, by: promoting participation in a multi-level marketing program with a compensation structure that causes or is likely to cause harm to participants; making false or misleading income representations; making unsubstantiated claims regarding the retail sales income earned by participants in Defendants’ program; and providing participants in Defendants’ program with the means and instrumentalities to engage in deceptive acts and practices.

There’s no significant differences there. Herbalife avoided the label “pyramid scheme” when it settled the case. FTC called it “unfair practices” rather than pyramid scheme.

Yes, it’s true: the FTC described Herbalife as a pyramid scheme, stating outright:

(1) unfair and deceptive practices

(2) the business op is an illusion for most, who must lose money for the top to make money.

Avoiding those words was clearly important to Herbalife’s global operations. They must be hoping they can continue to operate world wide, which is partially outside of the reach of US regulators.

Growth in China is risky. I have a friend who lived there for 8 years while he was getting an advanced degree at a top University there, and the government there *hates* that particular kind of behavior and has the power to immediately stamp it out if/when they choose to.

Aaong: (post #38)
There are a number of details in the investigation on why the FTC did not/could not classify HLF as a pyramid scheme. One reason is actually in the quote you provided.

FTC didn’t classify Herbalife that way, but it clearly could have done it … based on the factual allegations.

There are some major differences, but you didn’t focus on those but rather on other factors. You focused on what you saw as “incorrect interpretation of the case”, but you didn’t exactly provide more correct interpretations yourself.

* Vemma was temporarily halted by the court order, while Herbalife has been allowed to continue “unhalted”. A negotiated deal is much better than an involuntarily solution.

* Vemma was literally out of business for a few months, while Herbalife has been given time to adjust itself to new conditions.

Both Vemma and Herbalife have been allowed to continue operating a business. It means that both were found to have some legitimate business activities. So there isn’t much difference there either.

Most MLM companies will have some legitimate business activities. They will almost always have some sale to consumers. Even BurnLounge was allowed to continue operating one part of its business. The fact that Herbalife had some retail sale doesn’t make it “more legitimate” than Vemma.

I have Been an Herbalife member for four years now and just recently found that not one cent of the money I used to purchase products for myself and family has went toward my account.

I was told to spend a certain amount to build discounts as well as reputation, so I can be looked at as an supervisor and distributor in the future and yet those people that I thought were in my corner were not.

I found it interesting. Note the word ‘member’. Isn’t HL going to use ‘preferred member’ instead of ‘preferred customer’? Or am I reaching?